Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Samsung, SK to benefit from US ban on China's legacy chips
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By Park Jae-hyuk
Samsung Electronics and SK hynix are seen as beneficiaries of the U.S. government’s plan to tighten regulations on Chinese legacy chips, which is expected to result in banning American defense companies from importing semiconductors from China, according to securities analysts, Wednesday.
Last Thursday, the U.S. Department of Commerce announced it will launch a survey in January to identify how American companies engaged in critical industries, such as telecommunications, automobiles, aerospace and defense, are sourcing chips of 28 nanometers or larger from China. The department said the survey aims to “reduce national security risks posed by” China.
The upcoming measure is interpreted as a preemptive attempt to prevent Chinese firms' low-priced products from dominating the U.S. semiconductor market, as they did in the American steelmaking and solar power sectors.
After the announcement, the Korean government has been on alert over the measure’s potential impacts on domestic companies.
“The government has strengthened cooperation with the U.S. and major countries to stabilize the semiconductor supply chain,” the Ministry of Trade, Industry and Energy said last Friday. “Based on the cooperation, we will continue to speak with the U.S. government.”
However, most market observers expect the U.S. restriction to have negative impacts on the exports of Chinese chipmakers only, while helping Samsung and SK sell their stocks of legacy DRAMs and NAND flash chips.
“Regardless of the U.S. Department of Commerce’s additional actions on Chinese chips, American companies are expected to reduce their reliance on Chinese products to avoid regulatory uncertainties,” KB Securities analyst Kim Dong-won said. “The forthcoming U.S. measure seems to be targeting YMTC, CXMT and SMIC, and considering the supply of semiconductors, Chinese factories of Samsung and SK will likely be exempt from the measure.”
The analyst also said the forthcoming regulation is intended to curb the growth of YMTC’s share in the U.S. NAND flash market.
“Samsung and SK are expected to start profiting from their NAND businesses during the second half of next year, thanks to the price hike caused by decreased supply (of Chinese chips),” the analyst said. “As a result, both companies will enjoy rapid earnings growth.”
Korean chipmakers have remained cautious about predicting the potential impacts of the U.S. measure, given that they have operations in both the U.S. and China.
“In my personal opinion, the U.S. regulation on legacy chips will help Korean companies use up their inventories, as they have also produced legacy products,” a semiconductor industry official said on condition of anonymity.
Beijing has already criticized Washington for “weaponizing” trade issues. China’s foreign ministry spokesman Wang Wenbing urged the U.S. last Friday to respect international trade rules and market-based principles.